Gilkyson v. Disney Enters., Inc.

• Decision Date: 21 July 2021
• Docket Number: B300971
• Court: California Court of Appeals Court of Appeals
• Parties: Eliza GILKYSON et al., Plaintiffs and Appellants, v. DISNEY ENTERPRISES, INC., et al., Defendants and Appellants.

66 Cal.App.5th 900

281 Cal.Rptr.3d 539

Eliza GILKYSON et al., Plaintiffs and Appellants,

v.DISNEY ENTERPRISES, INC., et al., Defendants and Appellants.

B300971

Court of Appeal, Second District, Division 7, California.

Filed July 21, 2021

Hunter Salcido & Toms, John L. Hunter, Pasadena; Law Office of Craig Barker and Craig Barker for Plaintiffs and Appellants Eliza Gilkyson, Tony Gilkyson and Nancy Gilkyson.

Sidley Austin, Rollin A. Ransom, David R. Carpenter and Sheri Porth Rockwell, Los Angeles, for Defendants and Appellants Disney Enterprises, Inc. and Wonderland Music Company, Inc.

PERLUSS, P. J.

A jury awarded Eliza Gilkyson, Tony Gilkyson and Nancy Gilkyson, the adult children and heirs of songwriter Terry Gilkyson, $350,000 based on its finding that Disney Enterprises, Inc. and its music publishing subsidiary, Wonderland Music Company, Inc., (collectively Disney) had failed to pay contractually required royalties in connection with certain limited uses of "The Bare Necessities" and several other Gilkyson-composed songs in home entertainment releases of Walt Disney Productions's 1967 animated film The Jungle Book. Following the jury's verdict the trial court, ruling on the Gilkyson heirs’ cause of action for declaratory relief, awarded an additional $699,316.40 as damages for the period subsequent to the jury's verdict through the duration of the songs’ copyrights.

On appeal Disney contends it was entitled as a matter of law to judgment in its favor because its agreements with Gilkyson require payment of royalties only in an amount equal to 50 percent of net sums received by Wonderland for exploitation of the mechanical rights to the material Gilkyson composed and no such sums were received for the home entertainment releases of The Jungle Book after July 2009. Alternatively, Disney argues the trial court erred in awarding contract-based damages as part of the declaratory relief cause of action.

In a cross-appeal the Gilkyson heirs argue the trial court erred in denying their request for prejudgment interest. They also conditionally appeal the trial court's denial of their motion for a new trial on damages alone and for additur, in which they had argued the amounts awarded by the jury and the trial court were inadequate and not supported by substantial evidence. However, explaining they are prepared to accept the judgment as entered (plus prejudgment interest) to put an end to the litigation, the Gilkyson heirs ask us to reverse the ruling on their new trial motion only if we reverse the damage award on their declaratory relief cause of action.

We agree with Disney that interpretation of its agreements with Gilkyson is subject to de novo review; Gilkyson's right to receive royalties from exploitation of the mechanical reproduction rights in "The Bare Necessities" and other songs he wrote for The Jungle Book was dependent on Wonderland receiving payment for such exploitation; and the express language of the contracts granted Disney sole discretion to decide how to exploit the material, including whether a fee should be charged for Disney's own use of the material in home entertainment releases. Accordingly, we reverse the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

1. The Songwriting Agreements

Walt Disney Productions, Disney Enterprises's predecessor-in-interest, commissioned Gilkyson in 1963 to write songs for potential use in its anticipated animated motion picture The Jungle Book. The parties entered into a series of single-song contracts that are identical except for the names of the songs and the dates. Only "The Bare Necessities" was actually used in the motion picture, which was first released in theatres in 1967.¹ However, demo recordings made by Gilkyson of six other songs (referred to at trial as the deleted songs) were ultimately used with bonus features in certain of the home entertainment releases of The Jungle Book.

Each contract provided "the material," defined as "original lyrics and/or music (including any and all melodies, lyrics and music written by you hereunder)," was written as a work for hire, which meant Walt Disney Productions was the author and owned all rights. The contracts authorized Walt Disney Productions to assign the material to its wholly owned subsidiary, Wonderland. As consideration, Gilkyson received an initial fee of $1,000 and specified royalties for sales of sheet music and for licensing or other disposition of the mechanical reproduction rights. Specifically, paragraph 6 of each agreement provided, "We agree that in the event any of such material so written by you as a work made for hire shall be published by us or be licensed by us to be published in any of the media set forth in Subparagraphs (a), (b) and (c) below, you shall be entitled to receive (in addition to the amount mentioned in Paragraph 5 hereof) royalties from the publication of such material, as hereinbelow set forth: [¶] (a) Five cents (5¢) for each regular piano copy and/or orchestration that is sold and paid for at wholesale in the United States of America and Canada; [¶] (b) An amount of money equal to Fifty Percent (50%) of all net sums received by our music publisher in respect of regular piano copies and orchestrations sold and paid for in any foreign country other than Canada; [and] [¶] (c) An amount of money equal to Fifty Percent (50%) of the net amount received by our music publisher on account of licensing or other disposition of the mechanical reproduction rights in and to material so written by you."

Paragraph 7 of the agreements described the limited nature of Gilkyson's royalty rights: "You shall be entitled to receive as royalties only the moneys and/or royalties stipulated in and in accordance with Paragraph 6 above; specifically excepting, excluding and reserving to us all revenue, emoluments and/or receipts received by and paid to us by virtue of the exercise of the grand rights, dramatic rights, television rights and other performance rights, including the use of the material in motion pictures, photoplays, books, merchandising, television, radio and endeavors of the same or similar nature."

Paragraph 10 again stated the limited nature of Gilkyson's rights and granted Disney sole discretion as to exploitation of the material: "You shall have no interest in any of the material other than your right to receive the royalties specifically agreed herein to be paid to you. Nothing contained in this agreement shall be construed as obligating us to publish, release, exploit or otherwise distribute any of the material, and the same shall be always subject to our sole discretion."

2. Home Entertainment Release of The Jungle Book

Over the years Wonderland paid Gilkyson and subsequently his heirs² a share of royalties based on licensing "The Bare Necessities" for soundtracks, album and single-song sales in media that included phonograph records, audiocassette tapes, compact discs and audio-file digital downloads and streaming. However, Disney paid no royalties when, beginning in 1991, The Jungle Book was first released in a home videocassette (VHS) format or thereafter when it was released on LaserDisc, DVD, Blu-ray or other digital video formats for home entertainment use.

3. The Gilkyson Heirs’ Lawsuit and the First Appeal

In 2013 the Gilkyson heirs sued Disney alleging Disney had breached its contractual obligation to pay the Gilkyson heirs per-unit royalties in connection with the use of Gilkyson's songs in the DVD version of The Jungle Book released in 2007 and on VHS tapes, which had been released at an earlier date.³

Disney demurred to the complaint. While insisting its contractual obligation to pay mechanical reproduction royalties excluded use of Gilkyson's songs in any audiovisual medium, for purposes of its demurrer it confined its arguments to claiming the Gilkyson heirs’ causes of action were time-barred under the applicable statutes of limitations. In particular, emphasizing the allegation the DVDs had been released in 2007, Disney argued the Gilkyson heirs’ claim for breach of written contract accrued no later than 2007, thus making the claim, first filed in 2013, untimely under the governing four-year statute of limitations. In addition, the release of VHS tapes had occurred decades prior to 2007. Accordingly, Disney argued any claim for failure to pay royalties accrued at the first breach of contract in the 1990's, leaving all claims time-barred.

The trial court sustained Disney's demurrer, observing the claim for royalties began to accrue in 1991 when the VHS tapes of The Jungle Book were originally released and, at the latest, by December 31, 2007 when the DVDs were released. Under either scenario, the court ruled, the Gilkyson heirs’ claims were barred by the four-year statute of limitations for written contracts. The court granted the Gilkyson heirs leave to amend.

On April 30, 2014 the Gilkyson heirs filed a first amended complaint asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing and declaratory relief. The amended complaint contained similar allegations as the original complaint but added that Disney had released The Jungle Book 2 in 2008 and re-released The Jungle Book (a Diamond Edition) on Blu-ray format, digital download format and DVD in 2014. Specifically, with respect to the 2007 DVD the Gilkyson heirs alleged they were entitled to royalties for the use of "The Bare Necessities" in the film itself, the instrumental versions of "The Bare Necessities" that played when navigation menus were displayed, and a bonus feature in which the demo recordings of the Gilkyson-composed deleted songs played. As to the 2014 release, the Gilkyson heirs again alleged they were entitled to royalties for the use of "The Bare Necessities" in the motion picture and for use of music in certain bonus features, including a "Bear-E-Oke sing-along" that displayed the lyrics of "The Bare Necessity" over a clip of the motion picture in which the...